5 votes

creating infrastructure with goverment money to create more jobs? Why will it not work?

someone is arguing we should do this why exactly is this a bad idea that will not work?

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Damn it you beat me to it!!!

I just finished that book last week and I immediately thought of it when I saw the heading of this post. I just got "The Law" by bastiat from the Mises Institute today. My bro says it's awesome. Anyway I love to see people that take this as seriously as me and my brother.

Economics in One Lesson

In order to understand economics, and government spending - and to really understand some of the excellent responses below - I highly recommend setting aside a little time to read this book:

'Economics in One Lesson', by Henry Hazlitt

Here is the link to the FREE PDF version online:

http://mises.org/books/economics_in_one_lesson_hazlitt.pdf

By taking a little effort to read this very clear, simple book and reflecting he is telling you - the lightbulbs will go off and you will be light years ahead of 90% of the public in understanding the con game that is government spending.

To add to the responses below:

- Government produces nothing of value. Government extracts value - "manages" (quotations mine) - and then redistributes value (as noted below)

- Trusting government with the responsibility to do this for the public benefit - means that you trust that

A) Government has the public interest in mind, and

B) Government is competent to do this, at all.

- In the case of A)

There is very little evidence that any group of elected or unelected leaders and bureaucrat has our best interests in mind.

This is evidenced by the highest national debt in world history, a total disregard for the Rule of Law or their oaths of office, blatant criminality and cronysism that is lining their pockets, and a complete disregard for the well being, prosperity, health, or safety of Americans.

So ... A) the Federal Govt has our best interest in mind - is easily seen to be false.

Yet even if A) were true ...

- In the case of B)

There is no evidence that any group of elected or unelected leaders and bureaucrat is qualified to run and manage redistribution schemes and infrastructure building on any scale.

In fact, almost every single project the Federal Government has ever taken on has had no regard to budget - is inferior in quality to a private sector project - is plagued by corruption and cronyism - and gives a substandard result that takes 2 to 3 times as long to complete (if it ever is completed at all.) ...

The project costs many, many times their initial estimates - that were phony numbers to sell the public on the project to begin with - and most of the money spent is wasted or outright stolen.

Government projects are outside of the free market forces of competition and profit calculation and are therefore doomed to low quality, high priced failure.

Government actions, laws and regulations are always plagued by both the Law of Unintended Consequences - and the Calculation Problem ...

But in order to understand this fully ... read Henry Hazlitt.

He describes this and many other factors that answer your question much more eloquently than I.

Less Than Zero Sum Game

Every penny taken to make it happen is taken away from other jobs -- in the form of pay cuts (taxes) from those working, or from profits (taxes) from those who would otherwise hire more workers.

Lots of it goes into worthless overhead and bureaucracy. They say that every bureaucrat costs many times more jobs than the one they hold. Cost over-runs, and many layers of "supervisors."

All to do what? Pay to bomb bridges and rebuild them elsewhere? Force an entire state's residents to pay for high-speed rail only a fraction of them will ever use? Paint out grafitti?

That same money, left in the hands of people who are better motivated, would translate into real jobs, productive jobs, and jobs that last. When the economy picks up, the money for infrastructure from the existing sources will flow again.

What do you think? http://consequeries.com/

ever hear the phrase "eating

ever hear the phrase "eating your seed corn" ?

This is a good question,

because there are many newbies out there who really don't know the answer, and actually wonder why it isn't a good thing. Especially the progressives who are just now learning that there actually is some form of economy that isn't the government.

Some good answers below, and I suspect many more good answers are coming.

The government can create

The government can create jobs by funding the development of infrastructure. But such an endeavor requires the use of resources. Considering the fact that resources are limited, such a program would, necessarily, remove resources from somewhere else in order to obtain what is necessary to create the infrastructure. The problem with this can be viewed from the perspective of morality or economics.

Morally, why should I be forced to hand over my money for a thing which I do not want? That is money which I could have used to advance my own existence as I see fit. Infrastructure certainly does not benefit all taxpayers equally.

Economically, more spending will not solve any of our problems. The lack of jobs is a symptom of low savings, not insufficient spending. These wouldn't even be permanent jobs. Upon the completion of the project, the jobs which supported it would no longer exist. The economic argument which favors this kind of spending proposes that it will provide a boom in economic activity. That is right. The workers will be paid and the industries which support the construction will profit. Those who benefit directly will use their money in a certain way and in a certain geographical area and so there will be more indirect benefit as the money is dispersed. But this is all temporary and at the expense of those from whom the government suckles.

When the project is finished, so will be its supporting cast. What is left is even more unemployment than there was originally--the bust. And you have a new road or bridge or tunnel or rail which had its origin in the whimsical demands of politicians, rather than in the well-considered demand of potential users and thoughtful investors. That effort could have been put into something people actually wanted--something not based on the fickle.

In other words, it's waste--a misallocation of resources. These ideas are what keep humanity from true prosperity.

Because the money isn't

Because the money isn't theirs, the government has no inherent desire to spend it wisely, as opposed to someone who invests from their own pocket.

Job Creation 101

Job Creation 101

Take a hundred million dollars from taxpayers and give it to the government. The government will spend it, and in the process, sustain and create jobs. How many? Let’s say, [A].

Allow taxpayers to retain the one hundred million dollars. They will invest and spend it, and in the process, sustain and create jobs. How many? Let’s say, [B].

If [A]>[B], then we should give government virtually all of our hard earned wages. The Soviet Union was run on the basis that [A]>[B]. Case closed.

As [B]>[A], as is always the case, we must only give so much of our hard-earned wages to government as are needed to support essential services, both at Federal and State level. (Shrinking the size of government at Federal level, only to expand it at State level accomplishes nothing.)

Side note: When the government borrows money, it might create jobs, but the impact is temporary and illusionary, because future tax revenues applied to interest payments and debt redemption will hamper job growth. Deficit spending, especially on a sustained basis, is highly immoral, but by the time our children and grandchildren come to recognize the immorality of the debt burden that they have inherited, it will be too late. The culprits will be dead and buried. Their only legacy: mountains of debt.

Now for an example, to illustrate the point, but I am not going to mention the name of this country. In the past, when I have mentioned the name, people without any proper rebuttals, always drag up some irrelevant fact about the country’s social policies or whatnot.

This country became independent about 45 years ago, at which time it had per capita income of $600, below that of Guatemala. The country’s economy grew on average at 9% p.a. since then. Today, it is the 4th wealthiest country in the world on a per capita basis, with GDP per capita of approximately $50,000 – no need to debate welfare or entitlement programs in such an economic environment. The country has no natural resources. Government spending is equal to about 12.5% of GDP. The highest individual tax rate is 20% and the corporate tax rate is 18%, but many US corporations have relocated their manufacturing facilities to this country and, consequently, enjoy a tax holiday. The unemployment rate is below 4%. The government runs a budget surplus. Its leaders are the highest paid politicians in the world – now that’s an incentive for the likes of Gingrich and Santorum.

Job Creation 101: Limited government and low taxes.

Plano TX

reedr3v's picture

Take a look at all enterprises run by

the federal government. do you see any that turn a profit, or that don't run at huge losses of taxpayer funding? Can you name one in the history of the country going back to the railroads at least? How advanced are our railroads? What about the Postal monopoly? How did the Army Corps of Engineers do in shoring up the levees to protect New Orleans from Katrina? I'm not cherry picking here. this dismal story is repeated endlessly in every federal enterprise.

Why people blank out all the consistent failures and let their fantasies of benefits by coercive centralized management run wild is beyond rational understanding.

The government doesn't have

The government doesn't have the capital to make the investment.
The government has to take your money and my money to pay the workers.
You can't start your business and I can't retire because the government is taking our money.

Because Keynesian economics

Because Keynesian economics doesn't work.

“Let it not be said that no one cared, that no one objected once it’s realized that our liberties and wealth are in jeopardy.”
― Ron Paul